This prior post went in-depth into the recent RTX (Raytheon) FCPA enforcement action regarding bribery schemes in Qatar.
The net $361.2 FCPA enforcement action involved a net $259.7 million DOJ FCPA enforcement action and a net $101.5 million SEC FCPA enforcement action.
This post highlights additional issues to consider.
Timeline
As RTX previously disclosed:
“[I]n 2019, Raytheon Company received a subpoena from the SEC seeking information in connection with an investigation into whether there were improper payments made by Raytheon Company, our joint venture known as Thales-Raytheon Systems (TRS), or anyone acting on their behalf, in connection with TRS or Raytheon Company contracts in certain Middle East countries since 2014. In the first quarter of 2020, the DOJ advised Raytheon Company it had opened a parallel criminal investigation. In the third quarter of 2020, Raytheon Company received an additional subpoena from the SEC, seeking information and documents as part of its ongoing investigation.”
From start to finish, the company’s FCPA scrutiny lasted approximately 4-5 years.
I’ve said it many times, and will continue saying it until the cows come home: if the DOJ/SEC want their FCPA enforcement programs to be viewed as more credible and more effective, the enforcement agencies must resolve instances of FCPA scrutiny much quicker.
This includes the RTX matter in which the DOJ stated:
“The Company’s cooperation included, among other things, (i) providing information obtained through its internal investigation, which allowed the government to preserve and obtain evidence as part of its own independent investigation; (ii) facilitating interviews with current and former employees; (iii) making detailed factual presentations to the Offices; (iv) proactively disclosing certain evidence of which the Offices were previously unaware and identifying key documents in materials produced by the Company; and (v) engaging experts to conduct financial analyses.”
Origin
Raytheon’s FCPA scrutiny appears to have originated from a civil lawsuit.
As previously reported by the Wall Street Journal, in 2019 Tarek Fouad (a U.S. and British citizen and founding 20% shareholder of Digital Soula Systems – a Qatar based defense and security consultancy) filed a civil action in federal court in California against the State of Qatar, the Ministry of Defense, the Qatar Armed Forces, and the Ministry of Economy and Commerce.
As reported:
“A lawsuit in California, dismissed [in 2020] on jurisdictional grounds, included allegations that Raytheon had funneled around 7 million Qatari riyal, the equivalent of $1.9 million, in payoffs through Digital Soula Systems, a Doha, Qatar-based defense and security-consulting firm that was part-owned by a brother of the country’s emir.
[…]
The alleged bribes were intended for Sheikh Joaan bin Hamad bin Khalifa Al Thani, the brother of Qatar’s emir, according to Mr. Fouad, in what his legal complaint described as an “apparent effort” to influence Qatar’s acquisition of defense systems.
[…]
Mr. Fouad alleged that Raytheon between 2014 and 2016 directed a series of payments into bank accounts associated with Digital Soula Systems. Bank statements included in his lawsuit show several such payments from Raytheon in 2014, the former director alleged.
The payments were supposed to be compensation for defense studies that Digital Soula Systems would produce for Raytheon, Mr. Fouad alleged in the suit. But metadata extracted from digital files of the studies appear to show that Raytheon itself had created them, according to a forensic report commissioned by Mr. Fouad and included in his lawsuit
[…]
One of Digital Soula Systems’ directors was an active-duty lieutenant colonel for the QAF, and the consulting firm was majority-owned by Sheikh Joaan, according to commercial registration records included by Mr. Fouad in his lawsuit. Sheikh Joaan was the majority owner of a company called Al Sedriah, which held a 60% stake in Digital Soula Systems, the records show.
[…]
Raytheon had knowledge of Sheikh Joaan’s stake in Digital Soula Systems, according to Mr. Fouad’s lawsuit.”
“Shooting Oneself in the Foot?”
It’s a topic that has long been discussed on these pages. (See here).
The Department of Justice has long wanted companies to voluntarily disclose conduct that implicates the Foreign Corrupt Practices Act.
But what does the DOJ actually “allow” in its resolution of an FCPA matter?
In the RTX enforcement action, what the DOJ “allowed” is pretty much summed up this way.
Raytheon (the subject of three prior civil or regulatory enforcement actions) resolved an FCPA enforcement action through a deferred prosecution agreement (on the same day the company also resolved other criminal and civil matters) in which the company did not voluntarily disclose and in which the company during the “initial phases of the [DOJ] investigation “was at times slow to respond to the DOJs requests and failed to provide relevant information in its possession.”
Under these circumstances, Raytheon received a criminal penalty amount 20 percent discount off the 20th percentile of the Sentencing Guidelines fine range.
